6 Ways To Handle A Sudden Cash Flow

A lottery win, a large inheritance, or a run of good luck at the gaming tables has happened to all of us, at least in our dreams.

Even if the sum is small, you will almost certainly receive some unexpected funds at some point.It can improve your quality of life if you manage it properly.If you get it wrong, it could ruin your life.

But, whether you have millions or just a $3,000 tax refund, here’s how to make the most of it.


HBRH ShutterstockAt first, don’t do anything. Don’t go on shopping sprees, donate to charities, or lend money to friends and family.Don’t tell anyone.The last thing you want to do is risk squandering your windfall by acting rashly or encouraging friends and distant relatives to volunteer or extend their hands.

The larger the sum, the more time you should set aside to assess your financial situation and set some short- and long-term objectives.If the sum is significant, a month isn’t excessive.After all, the cash isn’t going away.

Debt with a high interest rate should be paid off first.

The first step should be obvious once the planning stage is completed. Tomasz Guzowsk ShutterstockPay off any debt you have, especially high-interest debt.Using a $5,000 bonus to pay off a $5,000 credit card balance with a 24% interest rate is the same as earning 24% interest risk-free and tax-free, which is difficult to achieve elsewhere.

In some cases, paying down debt isn’t the best option.For example, if you pay 3% on a mortgage and can earn 10% in the stock market or elsewhere, you will clearly be better off keeping your debt.However, paying interest is bad in general, and the best thing you can do with any extra cash, windfall or otherwise, is to pay down your debt.

Set aside some money for emergencies.

Pig and rainboots under umbrella

Shutterstock Maria Dryfhout

Okay, so you’ve considered your options and eliminated some debt.Can you now go to the mall?

No, not yet.Set aside some of that money for a rainy day.If you’re on the verge of a financial emergency, now is the time to act.

Ideally, you should have at least six months’ worth of living expenses in a readily accessible emergency account, such as a savings account or money market fund.Check out 9 Ways to Build an Emergency Fund When Money Is Tight for more information.

The rest should be grown.

Jars of change with plants sprouting.

TZIDO SUN ShutterstockIf you are fortunate enough to inherit a sum of money, the best thing you can do is turn it into a sum of money equal to 200000.By putting money into it.

If you don’t know what to do, now is the time to do some research.Start with 10 Stock Investing Tips for a Successful Start.

Seek professional help.

Couple meeting with financial planner in office.

If you have a large windfall, you should hire an expert.Interview a number of financial advisers who are paid by the hour rather than by commission.Also, never do business with someone without first verifying their credentials.

Check with friends for recommendations and the National Association of Personal Financial Advisors for more information.

Also, never just hand over your money to someone else.An adviser’s job is to help you understand your investments.It is your responsibility to be financially responsible for yourself.

Check out 3 Steps to Finding the Perfect Financial Adviser for more information on how to find the right help.

Take pleasure in yourself.

Woman on the bow of a sailboat.

Finally, use some of that money to treat yourself to a memorable experience, such as a trip to a location you’ve always wanted to visit.One of the most important reasons to have money is to be able to enjoy it.

Obviously, the importance you place on the preceding steps is largely determined by the size of your windfall.A ten-million-dollar inheritance is not the same as a $2,000 bonus at work.But the principle remains the same: take your time, consider your options, and decide where your money will get you the most bang for your buck.

Have you ever come into money? If so, did you spend it wisely or squander it? Tell us about it in the comments section below or on our Facebook page.

The information you’ll find on this site is always objective.However, we may be compensated if you click on links within our stories.

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